)
The turnaround efforts of Air India, the public sector airline, are paying off. While its non-core moves such as asset monetisation have not yet generated substantial income, the airline's operations have seen an upswing in the last six months (April-September, 2013).
Its revenue has increased by 18 per cent at Rs 6,698 crore in the first half of 2013-14 (over first half of last year), thanks to its revenue management and marketing strategy.
The revenue growth is in contrast with its rival, full-service Jet Airways that saw a decline in revenue in the first quarter and a near-flat performance in the second.
Air India's performance metrics such as occupancy and on-time performance too have improved. The domestic share has increased from 17.6 per cent to 19.4 per cent (of a market that ferried about 30 million passengers).
| GROWTH TAKES OFF |
|
"We streamlined our schedule and looked at our loss-making routes. A few of them in southern India have been discontinued. In the international sectors, we operate Boeing 787s to London, Paris and Frankfurt, and we are generating cash surplus on these routes. In a month's time, our entire East Asia network will be served by the same aircraft model," says Air India's commercial director Pankaj Srivastava. While the Boeing 787s are helping in route economics and a lower fuel-burn, the airline is driving revenue growth through a mix of sales and marketing strategies.
In sales, it has been offering agents extra incentives to propel occupancy. This includes the 'cut and pay' scheme, in which agents remit only 90-95 per cent of the ticket amount to the airline and keep the rest, over and above taking their commissions. This also allows the agents' flexibility to price tickets at a discount to the mark-up price to woo flyers. As they need return only 90-95 per cent to Air India, they can now offer a discount and still earn on every ticket.
The airline has also incentivised certain domestic flights which operate at odd hours for the agents. "Loads on these odd-hour flights have always been low. Now, agents get incentives to sell these tickets," says an airline source.
Air India is strengthening its corporate business too. A few months ago, it tied up with State Bank of India to launch co-branded credit cards and revamped its tour products.
On international routes, especially on Australia-India and US-India, when competition had dropped fares in the last two months, Air India stuck with its original rates.
It was a clear signal that the thrust would be on improving revenue for Air India, as occupancy levels dropped in the flights as per global slowdown, a source says.
"Product consistency has helped Air India. Its on-time performance has improved and passengers are favouring the airline once again," says Manoj Samuel, director of Riya Travels. "The focus is back on customer service," says Rajji Rai, ex-president of Travel Agents Association of India.
Yet, miles to go
Industry sources say there is an intent among the airline's top management to make the organisation leaner.
The airline is also under pressure from the government to deliver but in a bureaucratic set-up, the changes have been slow.
For example, its cost-saving plans. Air India announced in May the plan to save Rs 500 crore with the help of recommendations made by board member, Professor Ravindra Dholakia.
But Air India has not shared how much it has saved through these measures or details of its profit or loss, at post-tax and EBDITA levels. It has not given a break-up of expenses either.
"Some of the big-ticket items like asset monetisation have not yielded much result. We expect to earn Rs 1,200 crore from sale of land and properties this fiscal. We were expecting to conclude sale and lease-back of Boeing 787s for some profits. We were also expecting compensation from Boeing for the grounding of 787s. These have not materialised yet," a company executive says.
Another senior executive says, "Excess baggage charges are being strictly enforced. We have dropped elaborate meal service on short-haul flights but there is pressure from within not to discontinue free meals altogether. These recommendations can not be implemented overnight."
Costs had gone up in September when fuel prices had peaked but the prices have eased in November. The Centre for Asia Pacific Aviation has estimated that domestic airlines posted a loss of $500 million (Rs 3,100 crore). Jet Airways posted a loss of Rs 998 crore, while SpiceJet reported Rs 559 crore in losses in the second quarter.
Air India plans to raise Rs 2,500 crore from banks. The airline has secured a sovereign guarantee from the government that would enable it to raise loans at cheaper rates from the market. The money would be utilised to clear dues to vendors and airport operators.
